Bundesbank: German Economy to Return to Growth This Quarter

The German economy, Europe’s largest, will return to growth in the current quarter as industrial production rebounds, the Bundesbank said.

“The economic outlook for Germany has improved relatively quickly and in remarkable fashion in the past three months,” the Frankfurt-based central bank said in its monthly report Monday. “For the first quarter of 2013 an expansion of overall economic output can be expected from today’s perspective.”

The German economy contracted more than economists forecast in the fourth quarter, shrinking 0.6 percent from the third as exports declined and companies postponed investment. Signs are mounting that the economy has begun to recover from its slump, with business and investor confidence improving in January and unemployment unexpectedly dropping.

“For the remainder of the year, a gradual economic recovery is on the cards, even though exports shouldn’t be expected to deliver the initial spark,” the Bundesbank said. While the easing of Europe’s debt crisis has contributed to improving confidence in Germany, severe recessions in some euro member countries will damp growth, it said.

The Bundesbank lowered its 2013 growth forecast in December to 0.4 percent. That compares with a contraction of 0.3 percent in the euro region, according to projections by the European Central Bank.

“For the winter months of 2013, survey-based indicators for the euro area point to a slight relaxation but not yet to a broad-based economic upswing,” the Bundesbank said. The 17- nation economy shrank 0.5 percent last year, with performances ranging from a 6.5 percent contraction in Greece to 3.5 percent growth in Estonia, it said. Germany grew 0.7 percent in 2012.